I'll try my hand at a few:
A Skin and skinning one's system is a more general term. A Blind, or Windowblind is a type of skin applied with the program Windowblinds created by Stardock Corp. which runs this site thru a nice fella named Jafo, and is Moderated in it's content (Forums and Galleries) by a bunch of meanies called Mods (or Moderators)...lol...actually they are a bunch of guys/gals who are senior members of the Community.
A Visual Style can be a Windowblind or msstyle, Winstep theme, etc. There are other programs you can use 'to skin' your computer's gui like Winstep, and msstyles, etc.
Your last line asks a question about how they do it...by altering system files (msstyles...etc) by substituting a file instead of what comes with your computer. Windowblinds and Winstep don't alter your files. They reside in your RAM. They are far more desirable for that reason.
Above, Zubaz tells you a lot in very few words... If wish you can download trial versions of some programs from Stardock.com and a free graphics program called Gimp from the net, and play around. Skinning is really hard, though and only very few do it well.
Here's a good link where you can learn about the programs and how they work... The Wiki... LINK.
There are generalities and inaccuracies in my answer which folks who know lots more than me will whack me for, but I thought I could get you going on your search for answers.
Smiles...
doc.